Strong outlook: CattleFax provides optimism in beef industry
A strong demand for beef, combined with higher cattle prices, set the scene for an optimistic outlook for the beef and grain industries, according to CattleFax, which presented a U.S. and global protein and grain outlook during the National Cattlemen’s Beef Association (NCBA) 2021 Cattle Industry Convention Winter Reboot held Feb. 24.
Though 2020 boasted many disruptions to the industry, consumer demand remains strong and continues to be a trend in the early months of 2021.
Fed cattle market
CattleFax CEO Randy Blach shared cattle numbers will continue to contract through 2021, with the potential for producers to gain leverage on packers with a more equitable margin distribution. Additionally, Blach shares packing capacity is expected to increase as small-scale plants across the U.S. open and U.S. meat exports grow.
Kevin Good, vice president of industry relations and analysis at CattleFax, noted 1.2 million head of cattle were liquidated in 2019-20, following a large expansion in the industry between 2014-18. In 2021, the industry is facing mild liquidation due to drought conditions and the La Niña cycle, as well as higher feed costs.
Additionally, Good added the beef industry in 2021 is split two ways.
“There are more cattle in the system early in 2021 with big supplies on feed and heavy weights, however, the second part of the year will transition to tighter calf crops and tighter slaughter,” he said, noting total slaughter is expected to be up 700,000 head to 33.5 million head.
The average fed steer price in 2021, as forecasted by Good, is $119 per hundredweight (cwt), up $10 over the 2020 average of $109 per cwt. Prices in 2021 could range between $110 and $128 throughout the year, he noted.
U.S. beef prices continue to be competitive in foreign markets, specifically Asian markets. According to Good, U.S. beef exports to Asian markets are expected to grow by five percent with expansions to Japan, South Korea and China, which inversely are decreasing imports from Australia and New Zealand.
Blach shared the demand for beef was the strongest year for the industry in over 30 years, noting the strong demand will carry into 2021. However, Blach noted cattle producers didn’t see much of this margin because of processing plant closures as a result of the COVID-19 pandemic.
Although many household incomes were displaced by the pandemic, Blach noted household wealth increased more than $620 billion in 2020 thanks to government benefits.
“Total meat sales volume was up 10 percent in retail in 2020, and the total dollar increase in retail was up 18 percent to nearly $13 billion,” Blach said. “As the economy opens back up, people are going to want to get out and spend money, and I think restaurants will do very well.”
According to Good, per capita beef consumption is expected to grow slightly from 58.5 pounds in 2020 to 58.6 pounds per person in 2021, although total red meat and poultry consumption is expected to decrease from 221.7 pounds to 218.7 pounds.
“Over the last 20 years, beef market share increased from 40 to 48 percent,” said Good. “Improvements in genetics, quality and consistency have created a better product from five or 10 years ago and have helped to increase demand, taking market share away from pork and poultry.”
Blach added, “Consumers are voting with their pocketbooks and buying beef. The industry should take note, stay focused on quality, continue delivering what the consumer desires and tell their great story.”
In addition to domestic retail sales, the U.S. beef industry is seeing growth in beef exports. In fact, in 2020, the U.S. exported 120 million pounds of beef to China, and Good expect this number to grow to more than 300 million pounds each year over the next few years.
“The U.S. is the largest beef producer on the planet, producing 75 percent of all high-quality fed beef in the world, and our product is different from competitors,” Blach stated. “As the global population increases at a rate of 83 million people per year, U.S. agriculture is poised to play a key role with increasing exports.”
Averi Hales is the editor of the Wyoming Livestock Roundup. Send comments on this article to firstname.lastname@example.org.